How Microsoft Just Validated Best Buy's Turnaround Strategy

Michael Teague |

Best BuyUntil recently, one of the biggest perceived obstacles for big-box retailers was the practice of “showrooming,” by which customers would use stores like Best Buy (BBY) and Target (TGT) in order to test out products, in particular expensive electronics, and then go home and order them from Amazon.com (AMZN) or Ebay (EBAY) for much cheaper prices.

The landscape has changed appreciable, however, since the recent passage by the Senate of the 2013 Marketplace Fairness Act that imposes stricter sales-tax requirements on e-commerce.



But Best Buy wasn’t going to sit on its hands, however. With the company’s founder Richard Schulze attempting to take the company private, new CEO Hubert Joly quickly put in place a turnaround plan, the main target of which was the scourge of showrooming. Aside from some downsizing, at the executive level no less, and the closure of some underperforming locations, the company immediately offered an aggressive price-matching plan, and reconfigured stores in such a way as to better deter shoppers from the practice.

Part of the redrawing of stores involved bringing in sought after tech companies such as Apple (AAPL) and Samsung to set up store-in-store locations. In early April, Best Buy announced that Samsung would be opening 1,400 of its Experience shops in locations throughout the United States.

Best Buy’s sales floor is sought-after retail space for big techs trying to provide customers and prospective customers with a more hands-on experience of the products they offer, and now, it appears that Microsoft (MSFT) will be getting in on the action.

Starting this month, the formerly dominant computer firm will attempt to overcome the lukewarm reception of its recent Windows 8 release with 500 store-in-store installations in the U.S. and 100 more in Canada. The locations will feature PCs, tablets, the Xbox, along with over 1,200 trained staff members to present the products.

The announcement garnered no sign of enthusiasm for Microsoft who closed Thursday down 0.8 percent to $34.72. Best Buy, on the other hand, jumped 2.53 percent to $27.56 against the backdrop of a broad rally for stocks.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
EBAY eBay Inc. 33.40 -0.12 -0.36 4,317,756 Trade
TGT Target Corporation 53.12 -0.02 -0.04 4,351,791 Trade
AMZN Amazon.com Inc. 845.61 -1.77 -0.21 2,138,269 Trade
BBY Best Buy Co. Inc. 44.85 0.23 0.52 2,553,581 Trade
GLDC Golden Enterprises Inc. n/a n/a n/a 0 Trade
MSFT Microsoft Corporation 64.98 0.11 0.17 22,617,105 Trade

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